This is the second of two columns about the future of Apple. My last column looked at Apple’s immediate challenges in the iPhone business, while this one looks at the company’s mid-to-long term prospects and how best to face them. The underlying question is whether Apple has peaked as a company, but I think the more proper way to put it is how must Apple change in order to continue to grow?

Even as some analysts are downgrading Apple based on reported cancellation of component orders, saner heads have been crunching the numbers and realized that Apple still has a heck of an iPhone business. So if you are a trader I think you can be sure Apple shares will shortly recover, making this a buying opportunity for the stock.

I deliberately don’t buy any tech shares, by the way, in order not to be influenced or tempted to influence you.

The one bit of advice Steve Jobs gave to Tim Cook was to not ask himself “how would Steve do it?” That’s the Walt Disney quandary that Steve looked to as an example of how companies shouldn’t behave following the death of a charismatic founder. But I think in the case of Apple it goes further than that, because the company is approaching the point where doing it the way Steve would have — if that knowledge can even be conjured up — probably isn’t anymore the best way for Apple.

The Steve Jobs technique is to grow the company by entering new markets with brilliant solutions creating whole new product categories. Apple’s emerging problem is that there are fewer such markets to be entered just as it is harder to create products that are obviously and compellingly superior. While this is Tim Cook’s problem it would have been Steve Jobs’s problem, too, had Steve survived.

When he returned to Apple in 1997 Steve Jobs was faced with fixing the company’s financials and rationalizing its product line. Apple had no real product strategy in those Sculley/Spindler/Amelio days and simply made too many things. So the first couple years were spent doing the obvious chores of cutting the company and its product lines down which inevitably yielded better gross margins.

Once he had the company reorganized and ready for action Steve attacked the market with innovative new products. The first of these was the iMac, a thoughtfully done all-in-one computer. The iMac wasn’t earthshaking but it didn’t have to be. It was elegant and simple and created a new product category, which was the whole point. Steve’s answer to almost any challenge was to create a new product category.

Now here’s an interesting aside. I read a product review just today of Apple’s newest iMacs saying that as a value proposition the 20-incher isn’t as good as Windows-based all-in-ones from some other companies. I don’t know if this is true or not, but what I find noteworthy is that it took 13 years for such a review to appear.

Let’s take this iMac issue a little further, because I think it is a great example of where Apple’s biggest challenge lies. If the 20-inch iMac isn’t notably superior to competing Windows all-in-ones, why is that? It’s because as products and underlying technologies mature it becomes harder and harder to be obviously better. In the case of these iMacs there’s a physical design, processing power, storage, and of course the operating system and applications. The new iMacs are incredibly thin, but what if they were already thin enough? They have massive processing power, but unless you are editing video who would know? The Fusion Drive (if installed) is fast, but SSDs are an option on most Windows all-in-ones. And where’s the Apple touchscreen? I don’t think anyone is arguing that Win8 all-in-ones are better than the new iMacs, but a lot of people would argue that they are better for the money.

This is the first part of Apple’s core challenge: it’s increasingly harder to be demonstrably better within a mature product class. A friend recently cited a similar example in the high-end audio market where new technology has also resulted in a similar leveling at the expense of high end suppliers. The actual difference in sound quality between a high end preamp for $25,000 and one for $2,500 (or even $799) is much less than it used to be, so why buy the expensive stuff?

Computing Technology is doing the same thing. Apple raised the bar and the competition has been forced to bring their A game. In the process there is a certain diminishment of cool as even a grade-schooler can have a smart phone or a tablet. Now what? Apple has elected to back away from the pro market and concentrate on consumers. Computing has become ubiquitous. I’m not altogether sure even Steve himself would have had a magic pill in this market.

Steve Jobs didn’t worry about this much, because he was always looking toward the next new product category, not minding the loss of market share in earlier niches. The problem with Steve’s attitude, though, is two-fold: 1) there are only so many product categories, and; 2) the bigger Apple becomes the larger a product category has to be to be worth pursuing. This makes the population of possible new product categories even smaller.

As an example let’s consider the Apple TV, which continues to be classified by Apple as a hobby — a tacit admission that the category simply isn’t big enough to be strategic. Yet Apple has sold seven million of the little boxes, illustrating how scale has changed at Apple.

Scale is the second part of Apple’s core challenge. Anything they do has to scale massively or it will be a drag on sales and earnings. We can see Apple play this out in its internal silicon development, which is the best (and highest margin) way for them to achieve hardware scale. Though Apple doesn’t sell chips in the merchant market, by making its own Systems On Chip the company is revolutionizing each of its product categories from within.

Scale also comes from building an ecosystem around products. iTunes is an example of that for music and video. Apple makes money on the content but the content also builds demand for hardware. It’s a win-win. If Apple enters the TV market as rumored, it can only happen with a massive expansion of iTunes or some new content distribution strategy to give Apple a big chunk of what would otherwise be TV network and producer revenue.

With Apple the size it is now, new product categories not only have to scale, they have to come with scaling already attached.

So where Steve would have not worried so much about the atrophy of old product categories, choosing instead to simply invent the next big thing, at the scale where Apple operates presently there are fewer categories and those categories can’t reach their potential without sure-fire associated content strategies. This is Tim Cook’s challenge.

The good news for Apple fans is that the company surely has one or more new product categories yet to introduce. Steve was working on something before he died. So we’ll undoubtedly see at least one more thing. And because Apple has so darned much money and Tim Cook has to think about his legacy, too, there’s the very real possibility that Apple will simply pay to make the content scaling issues go away.

By this I mean that the exact same techniques Apple has used with such success dealing with component suppliers could be used with content suppliers, too. Apple gets the best flash ram prices, for example, by buying in huge volume and pre-paying for products. This also makes Apple immune to component shortages. What if they did the same thing with television? $10 billion in pre-orders for shows and movies would secure Apple’s content pipeline without any anti-trust concerns with minimal financial impact on Cupertino.

So the best days could well be ahead for Apple. But that can only happen if the company is ready to well and fully leave Steve behind.

71 Comments

Elliott Noel
January 17, 2013 at 2:10 pm

The scaling problem is reminiscent of Berkshire-Hathaway. Buffet and Munger have said that there are many great opportunities available today, but they’re not big enough to be worthwhile for their company to pursue. As they’ve grown, it’s become harder and harder to find appropriately sized deals that meet all of their quality criteria.

Peter
January 17, 2013 at 2:17 pm

Your idea that there are only so many new product categories is rather self-contradictory. The idea of a “new product category” is that it is one that no one has thought of yet. The number of such categories depends only on the creativity of the inventors (and the designers and marketers – likely to be limiting factors in *successful* new product catetories.)

ALP
January 17, 2013 at 3:41 pm

I think what Bob refers to are product categories that evolutionary in nature, where you take existing technology, look at it from a different angle, and re-package, which is what Apple has been doing very successfully.

Inventing absolutely new product categories we have not thought of yet, while there must be a lot of them, is extremely unpredictable. It may happen or it may not. It is more in the realm of venture capital.

shane
January 21, 2013 at 7:57 pm

That’s what I was thinking. The iPod wasn’t the first mp3 player. The iPhone wasn’t the first smartphone. The iPad wasn’t the first tablet. Apple’s success isn’t really in invention, but taking over poorly implemented product categories with better designs.

Nigel
January 17, 2013 at 2:21 pm

I must admit when I first saw the new iMac I thought of a large iPad on a stand. Because of this I assumed that iOS was the way forward for Apple, perhaps leaving OS X behind.

There’s a danger, it seems to me, that although so many people would rather do their surfing from the couch on a tablet (and indeed my wife is doing just that as I write!) portable devices have immense possibilities and are indeed game-changers, but, humans still have eight fingers and two thumbs. Desktop PCs and keyboards, or laptops, have evolved precisely because of our own hardware configuration. New and inventive ways to use portable devices certainly must open new markets but it seems hard for me to understand how “getting things done” on the scale that big businesses do, for example, can so easily be converted.

Apple hasn’t updated their pro lines for many years and many professionals in music, video or graphics industries bemoan the fact. All could use iPads because of the splendid apps being developed for them, but portable devices just don’t have the cooling power to tame anything powerful enough for serious work and until quantum chips become common-place I doubt they ever will.

Most IT manufacturers are guilty of neglecting their desktop because sales have been stolen by portable gadgets but ignoring that market is foolish and ripe for a nice big overhaul.

Perhaps Apple could do that.

Bert
January 17, 2013 at 2:58 pm

Interesting article, and so is your comment. Thank’s.
If I follow you, why not offering (meanning selling..) processing power in boxes as an accessory to an iOS ecosystem in which screens are tablets ?
An updated desktop line, that seems a big enough market for Apple for the years to come.

I’m not sure any single device will be the next big thing but rather a turnkey eco-system. Apple’s working towards that with iCloud but it’s still too clunky and last mile networking is still to restrictive (in the U.S. at least). I’ve been running a home AV server and at times have had netbooted Macs, as well as phones, iPods, and now iPads. I’m able to do this but it’s still beyond most folks. If Apple could deliver an Apple TV size home server that would cache purchases, photo-stream, documents, etc, and make an easier method of access (Music Player, video player, app store / purchased, etc), that might go a long ways to getting a stronger grip on consumers.

gymbo
January 17, 2013 at 8:52 pm

You make good points. I can imagine a more ergonomic input mechanism for tablets being a game-changer, for a while, then back to the laptop. Recall those chairs that you knelt on and had no back? …the ones you see at garage sales?

David Stewart
January 21, 2013 at 6:24 am

I well remember those chairs you mention and in fact they were very comfortable. The trouble is, people are just so used to sitting on chairs. It seems there are some games you simply can’t change. Take the QWERTY keyboard for example. Its layout was devised to eliminate the problem of the hammers jamming in the early days of typewriters 150 years ago. Now we’re stuck with it, even though there are no hammers to jam, and the technology has long since existed for creating words with multiple simultaneous keypresses. There have been experiments with such devices which showed that competent typists can enter text at double the speed. But try changing the ingrained habits of a couple of billion users.

Thanks for a very interesting column. One also has to ask where the great computer build-out into our personal lives can possibly go next. Electricity is an example. The basic suite of consumer appliances is pretty stable at this point- washing machine, dishwasher, mixer, leaf blower.. etc.. There are no huge vistas. On the computer front, one can see the TV/computer integration (or at least complete on-demand TV), home automation (to some degree), and eventually robots. I’d vote that Apple get into robots.

Scottyb
January 17, 2013 at 2:34 pm

The difference between normal people and Steve jobs is that normal people can’t imagine the future. The famous quote from the Patent office guy: “Everything that can
be invented has been invented.” That is very similar to “there are only so many product categories”.

The real question is, can someone at Apple continue to invent the future?

Aubergine
January 17, 2013 at 2:44 pm

“fewer such markets to be entered just as it is harder to create products that are obviously and compellingly superior”.

Never on your life! There are entire product sectors that are so lame they need (dreadful word) “reimagining”. Travel. Management. Healthcare. And yes, Steve would have done that.

cmoore
January 18, 2013 at 7:27 am

“Travel. Management. Healthcare. And yes, Steve would have done that.”

Im not sure I agree. Your talking abut enterprise. Steve was very clear both publicly and privately, that he was not interested in that space. Business environments are places where one or a very few make the buying choices for many.

Steve vastly preferred buying decisions that were made by users individually . Thats where he liked to make his sales pitch.

If consumer design inspired software development and use in the enterprise space that was ok, but he was loath to try and persuade enterprise level buyers directly. You could not gently repeat how he felt about them 🙂

There have been one or two iPad commercials showing education or medial use, but thats as far as it goes.

John
January 17, 2013 at 2:47 pm

This is a very common business problem and something Chuck Knight did extremely well when he was the CEO of Emerson Electric (EMR). Here is the problem. Emerson is a $24B a year company. Wall Street expects it to grow and be more profitable each quarter, each year. What Chuck did is realize Emerson was a collection of many products and services. Each of them had its own life cycle. Some were growing while others were declining. He managed each of them as an independent business. He expected (demanded) each of them to have sound plans to grow their business and deliver results. There are legendary stories about his review meetings. Each business was also required to INVEST in itself with the expectation those investments would be new products and services to replace the aging ones.

Chuck was not afraid of buying businesses either. When your are a multi-billion dollar company it is almost impossible to find new lines of business that will produce $100M a year in revenue. To a mulit-billion dollar company anything less is noise. Chuck bought businesses of all sizes. If their contribution to the bottom line was noise, he’d buy them if they had growth and profit potential. A hundred products that can produce $1M a year is as good as one product that can produce $100M. Profit is profit.

If you look at Apple’s product families there are ways to grow each of them.

Apple has the cash to invest in businesses that have good growth and profit potential. Apple has the cash to invest in many promising businesses.

Apple has enormous production capabilities. They have the means to make almost anything, with superior quality, and at a great price.

absolutely not. lines on graph paper are engineering approximations of what they can measure. the customer who only knows two creepy speakers in a $140 TV has not tried to expand their hearing yet. if I can train to hear subtleties from different types of monitor speakers in a studio, it is theoretically possible for anybody else.

I can hear the cartridge wobbling in the groove on my turntable attached to a single-point arcuate tonearm. but that’s not nearly as bad as a turntable with a thunk in it every revolution. and it only annoys on certain records. of such little insignificant things are the market for audiophool stereo made.

such little insignificant things presented to Steve Jobs engendered both epic “steve” stories and some nearly perfect products nobody ever knew they had to have. HAD. to have.

Ronc
January 18, 2013 at 4:18 pm

I can hear the turntable slow down as the windup spring runs down and needs to be cranked some more.

David Stewart
January 21, 2013 at 6:32 am

Years ago I used to know a guy who had a shop selling top-end esoteric hi-fi. He had his wife paint dots of nail varnish onto regular amplifier valves and sold them as special “red-spot” valves at four times the price. His customers couldn’t wait to get hold of them and insisted that their listening experience had been transformed by fitting them.

ReadyKilowatt
January 17, 2013 at 4:00 pm

One thing that people always seem to forget about Apple and Steve Jobs is that they rarely pioneered anything. Steve watched others introduce computers at the Homebrew Computer Club, some of whom got financing deals and started production (S100 bus being the most notable) prior to the Apple II. Lots of companies had painful-to-use MP3 players before the iPod. Smart phones had touch screens on them prior to the iPhone (Palm, Windows CE), had 3rd party apps (Nokia S60, Windows CE, Palm, etc), and could take a fairly good picture (Nokia N95). Microsoft poured millions into Windows tablet edition before putting the iPad into the photocopier and coming up with Win 8.

With that in mind, I think the next Mac mini will look like one of those little Android PCs, only done right. instead of HDMI it will have a displayport adapter (so you can use an Apple monitor, HDMI, DVI or whatever you happen to have), Bluetooth built in, so BT mice and keyboards are a simple no brainer, possibly have a GigE port, and 802.11N.

Now, here’s the best part: It will seamlessly tie into your i-cloud, and be running a desktop version of iOS, with a window manager and look and feel that’s somewhere in between an i-device and the normal OSX desktop. This is why they’ve been building the data centers, so that they can have on-demand back end power to chew on data when you need it. Need to do a bunch of video rendering? Fine, just push it off to the data center, where the finished file will be stored, backed up and secured for you. Siri was just a test to see how well everything works. Basically it would be a thin client, but not like Citrix which puts all the power on the server, it would have some local apps and local storage for caching.

This could also become the Apple TV, just by loading on the Apple TV app and getting a couch friendly remote.

Agreed. It doesn’t have to be a new dongle, though – I outlined some ideas here about a ‘Mac Mode’ for iPhone, which can act as Apple’s requisite ‘hardware dongle’.

But, yes, a video render that happens at near-instant speed on a server farm, and why ever buy a Mac Pro again? Rent the service for $30/mo with the full Adobe suite and why ever buy retail software again? (Apple takes 30% of Adobe’s cut, natch). Do it well enough that people will switch to iPhones for it and double-down on the 30% formula.

The Internet is fast enough now – I do most of my work over VNC at high-res and usually forget that I’m doing so (and Apple can do better with its GPU prowess). Most of us all have the same speed Larry had to his house back when I was beta testing a ‘MacNC’ unit.

you propose to reintroduce RIM’s tablet as an Apple failure? for that’s exactly what they did. that’s when their stock started being used to start fires in fireplaces instead of the newspaper.

Ronc
January 18, 2013 at 4:22 pm

“The Internet is fast enough now… ” Have you got FIOS? Where do you live and who provides the service?

dg
January 17, 2013 at 4:01 pm

Apple better get serious about TV, and soon! EBay is full of Android TV boxes (essentially a headless tablet) for $20-50 + $20 for a keyboard/mouse/remote. While they aren’t as polished as iOS, they do give your TV YouTube + Netflix + all the apps in the Google Play store. And they are quickly getting better with faster procs + more memory. And they are only $20!

ReadyKilowatt
January 17, 2013 at 6:21 pm

My point exactly. I use one for a very few apps because it is a horrendous UI on a big screen. The companies that are making them don’t have any backing from Google (in fact, Google would rather see them building Google TV devices I’m sure), so there’s no money behind a useful big screen (or desktop) UI.

Yes, the hardware is dirt cheap, but it’s also a market of early adopters and poor implementation. Just like Apple likes it.

Maynard Handley
January 20, 2013 at 10:48 am

You are missing the point if you assume that these cheap boxes threaten Apple…

Look at DAPs as a model. Apple didn’t ship the first DAP. Rather, by waiting and seeing the market grow, they ALSO saw pressure mount on the content providers, until Apple could finally negotiate with them from a position of reality — “Look, you ARE going to lose all your revenue from CDs, that’s just a fact, so you can give up, or you can work with us to make the iTunes store a viable CD replacement”.

Every one of those boxes, every use of Netflix, every search on SideReel, just ramps up the pressure in Apple’s direction. But when Apple has the content deals sewn up, they can swoop in offering an “experience” (hardware, purchase of shows, subscription ala netflix, the whole deal) which works that much better, works across all their product line, has at least an initial stab at working across the world.
The value in this space is not in making the $20 box, it is in content deals and on-going subscriptions, and it is APPLE that will get those, not some no-name Android vendor.

ernest
January 17, 2013 at 4:01 pm

The next product category is wearable computing. The classical wristwatch is a good example and the potential market is quite big too. It might even be the first new product to come under Tim Cook. Digital eyewear is another item in this category. Both will come for sure, the questions is who will be the first to bring them to the mass market. Another category might be the connected monitor – for your home, your car, or your health. Then, why not a portable audio/video tuner for both FM and TV signals?

Joel
January 17, 2013 at 4:56 pm

Maturity in the context of Mac OS (and Windows) means the nth optimisation of the 80s micro but there are some very serious and foundational improvements that are waiting to be made in the areas of information visualisation, management and comprehension that beckon to the brave. The reinvention of the personal computer, in whatever form factor, is something Apple should again use to take the lead and forge an indispensable product.

Great comments above. IMO, _innovation_ is all that really counts. It’s an anthropological assessment (envisioning) of the needs & apps & limitations of the customer, and then pushing your team to destroy the shibboleths in order to achieve “insane greatness.” NB the TV spot that has The Cable Guy saying something like “stuff you didn’t know you needed.” A B-school prof propounded a “sustainable growth rate” model. Apple has long existed & reinvented based on the second derivative (not the first, as Geoff Moore would have us believe) of the SGR; note that this is also the central competitive thesis of Sun Tzu, Confucius, Mao.

Greg
January 17, 2013 at 5:33 pm

There are multiple challenges, no doubt, to staying a leader in a field where your competitors copy your successful products. How do I stay more satisfied with my Apple product if the trade off for Apple’s superior user interface/experience are the competition’s lower price, often better specs, and (usually) more universal accessories. This trade off is less favorable to Apple the more the Apple interface is copied and the more limited Apple products become, especially limited service and upgrade options. For example, I worry that soon I may not be able to buy an upgradeable computer from Apple, given current trends. My perception of Apple being the superior product is being hampered by the way Apple limits my choices and product service, and so my satisfaction declines. I hope the current period is simply transitional, and that clearly superior products are in the pipeline, whether in a new or redefined product category or the same old product lines.

lrd555
January 17, 2013 at 5:47 pm

Apple’s problem: profits for last quarter will exceed Intel’s revenues this quarter. Ain’t that a big ass problem!

John
January 18, 2013 at 7:09 am

And that is one of the ironies of Wall Street. Microsoft has been making crazy amount of profit yet their stock has been lackluster for years. Now Apple has broken every business record and now Wall Street is getting bored with them. How do you define success? How do you define great performance? When is being the best of the best, good enough?

Greg
January 19, 2013 at 8:01 am

No doubt, Apple is a phenomenal company that has grown its business and revenue in astonishing ways. We should all have such problems. However, past performance does not guarantee future results.

For me, what counts is whether the product, whatever it is, helps me do what I want to do in fun and amazing ways. This “Jobs” factor, along with the iTunes/App store and ecosystem, made Apple rich. But the fun is diminishing, and for me, that is the canary in the coal mine. So much of everything now is delivery of web services. Can you really distinguish these services (Netflix, Google, Dropbox, ad nauseum) very much from one device to another? Can Apple also create superior web services and content, not just superior devices? Maps was not a good indicator.

Patrick
January 17, 2013 at 7:23 pm

I have enjoyed many of your columns over the years. Your analysis is always thoughtful even if I disagree. Steve did leave some long term ideas because he was always attacking the future not the past, so I agree there. The speach Steve gave on the digital lifestyle in 2001 or 2 was a classic example of this. Apples core strength of making the whole product has taken them a long way. I think the real challenge is how to get smarter at the cloud. Apple’s internet back up features are the weakest in the ecosystem and require really careful thought to elegantly manage the complexity of saving data. This problem is so tough even Steve avoided it. If you remember, when he was chastising the Moble me team he started by asking them how it was supposed to work. I just cannot imagine him doing this in any of the product areas like the iPhone where he was the vision for how it would work. Data protection, backups without failure or online services and apps are the real challenges in Apples ecosystem. Also keeping the interface consistent is another buggaboo.

I love the rarely pioneered meme. It is so blind. Apple pioneered smooth usage. The value of that contribution can never be overstated. Keeping a whole world of complexity at bay in a cell phone or computer is hard. Doing it so well that most people don’t even notice is magic.

The trend in computing is towards low cost or hidden cost. We have gone from the $5000 computer to the $500 cell phone. Next stop is $50 and it will happen even faster. The upside is way more computers per person. $5 and then $.5 will be here before 2025. At $.5 per compute node the density per person will explode. Literally everything will be “smart”. Apple is selling premium quality at each price point and delivering simplicity, privacy, and interoperability. I personally would prefer to pay for those commodities up front, and not have to guess which one is missing. I am not in the minority with that sentiment.

My partner who does contracting work for several of my businesses talks about the triangle of choices that faces every purchaser of goods and services: you can have it cheap, high quality, or fast, but you can only have two priorities. We know what Apple has chosen. I think they have their priorites right, and that will make all the difference.

I think there are plenty of opportunities out there for Apple. Steve was not blowing smoke when he said their brightest days are ahead.

Martin
January 17, 2013 at 11:14 pm

I say it’ll be ear-level Siri. Siri being a UI of sorts and a gateway to the cloud. Just need a way to slap a logo on it 😉

John
January 18, 2013 at 12:27 am

Apple had a remarkable run that many companies would be envious to replicate, even only a portion. Nobody should be surprised if the well has run dry, and the company settles into a slow decline like HP, or other former greats.

And since you cite a CNet review, Bob, what are your thoughts on the Dish/CBS situation that prompted Sandoval to resign?

I’ve always treated their reviews, if not editorial, with a grain of salt, and this latest incident only confirms my suspicion that they’re the McNews site for tech. Good enough for mass consumption and syndication, but otherwise lacking in real substance.

Mark
January 18, 2013 at 6:10 am

The notion that Apple’s running out of new product categories implies that everyone already has every technology they could possibly want. This obviously isn’t true.

Allan
January 18, 2013 at 9:15 am

Interesting that you include a picture of their “New Apple Campus”, approved in November 2012. Because one of the first things clueless companies do when they can’t figure out what else to do, is build a big building. It’s clueless, because increasing the size and burn-rate of the over-head charges for a new and prestigious building, adds nothing to the innovation or design of new products. The first Apple was built in a garage — and as the Steve Jobs lost video points out, when he built the Macintosh following the demise of Lisa, he did build a new factory — but that was because manufacturing the Macintosh required new factory techniques that weren’t available. Steve Job’s “Product” focus has been the key to Apple’s success. The alternative “Sales and Process” focus takes over when distribution and advertising becomes more important than Design. That’s when Apple goes down — and building an entire new campus seems symptomatic of this.

I was tempted to throw a mention of the new Apple campus into this column but then decided against it. It’s easy to take a cheap shot at the Silicon Valley edifice complex best exemplified in my view by Sun Quentin — Sun Microsystems’ huge campus in Menlo Park that is now Facebook’s. I decided not to include it, though, because Apple’s situation is very different. The company doesn’t over-hire and it’s presently split between two campuses a mile apart. Putting everyone together might well make sense. And unlike the various other example’s like Borland’s late innings $90 million campus in Scotts Valley, the financial impact on Apple is insignificant. Nothing else is suffering so Apple can build.

I sorely miss Borland. Their programming manuals were so much better than those written by Microsoft. Then the idiot in charge of Borland had to build that gigantic headquarters building — down the tubes the company went — so sad.

Maynard Handley
January 20, 2013 at 10:59 am

This is silly. Have you ever VISITED Cupertino?
Infinite Loop is the same size as it was when I worked at Apple, throughout the nineties. It must be bursting at the seams now. And even in the 90s, Infinite Loop wasn’t big enough, so you had all non-engineering happening at other building in Cupertino (marketing, HR, etc), and that’s probably fine, but you ALSO had a lot of HW engineering being forced to occur off-campus at buildings like those along Mariani. I’m guessing much of the newest things Apple has acquired (Siri, CPU design) occur in other cities because there is no space for them in Cupertino. All less than ideal.

(And there is no reason to believe that Apple’s ambitions end with the CPU design. Why not also GPU design? Why not, with or without the help of Intel (Rose Point) SW radio design for cellular, wifi and bluetooth? These are all reasonable ambitions, better realized by engineers working in proximity than by teams spread across the world.)

Ross
January 18, 2013 at 9:17 am

Bob,

Seems like the only real hurdle like you said is content for the next frontier. This shift is much like the shift to VHS, beta lost and likewise with HD and BlueRay. The 2 distinct factors in the past have been 2 vertical markets that tend to dictate the winner of these distribution methods. First is the porn industry, the second is Disney.

As apple has a squeeky clean image, the latter plays well to them.

So lets look at that for a moment, if Apple wants content and to have the foothold in the industry for a paradigm shift then it must embrace and hook disney. So who is the largest shareholder of Disney/abc/espn….

Its Steve Jobs after the sale of Pixar.

Would it not be within the realm possibility that apple along with Steve Jobs estate simply acquires the Disney franchise and thus lock up the content?

I’ve been arguing that since the Pixar sale. somebody out there can’t execute. firing time.

Joe
January 18, 2013 at 1:59 pm

I think the main reason this hasn’t happened is that will almost certainly cause the market to fragment (or, should I say, fragment worse than it is today). Apple buys Disney, and suddenly you can’t get Paramount movies on iTunes. Apple works hard to get the greatest variety of music, movies, etc. available on their devices. Buying a content firm itself would threaten the others.

Maynard Handley
January 20, 2013 at 11:01 am

TERRIBLE idea. Look at what happened to Sony when they thought the same way.
You do that and
(a) Every other content company has no interest in working with you.
(b) You cripple and skew all your hardware to meet the desires of the content arm.

Bob wrote: “Apple’s emerging problem is that there are fewer such markets to be entered…”

That’s what people thought before the iMac. And before the iPod. And before the iPhone. And before the iPad.

Steve Jobs said: “Think Different”

Ten years ago for my MBA, I wrote a paper on how Apple lives in the first two stages of the Product Life Cycle: introduction and growth. They generally avoid the latter two stages: maturity and decline. The first two stages are the riskiest but when the risks pay off, that’s where the fattest margins are.

John Sculley and his successors tried to morph Apple into a “mature” late-stages company like Dell because they lacked the vision and drive to survive in phases 1 and 2. But they failed because Apple’s DNA is in introducing cutting-edge technologies and riding the wave of fat margins before the competition catches up and those products become reduced to low-margin commodities. It would be folly for Tim Cook to try to go down that pathway again.

Brendan
January 18, 2013 at 2:00 pm

“Even as some analysts are downgrading Apple based on reported cancellation of component orders, saner heads have been crunching the numbers and realized that Apple still has a heck of an iPhone business. So if you are a trader I think you can be sure Apple shares will shortly recover, making this a buying opportunity for the stock.”

The sceptics probably know that Apple’s highly profitable run will continue for a while but they realise that it will soon slow down, without any new products to replace the current range. Apple have enough momentum in their brand name and product development to keep going for years but they do not have the same kind of monopoly that Microsoft and Intel did (and still do for some applications).

When a successful company grows so big that further growth becomes difficult, it’s time to split it up. Then each separate division would have its own managers, staff, products, and markets. The head office would supervise the various divisions and infuse more capital into divisions with the best prospects or into promising spinoffs. As markets mature, the head office would milk those divisions until they die. However, the head office would live on.

“The Steve Jobs technique is to grow the company by entering new markets with brilliant solutions creating whole new product categories. ”

This could not be further from the truth. The opportunities presented by cloud technologies, ISP bandwidth, etc., presents a world of opportunity for a company with enough overhead to claim the future of computing into the next Web revolution.

I am not talking about database strategies, but the simple solution to providing utility cloud computing to the masses. The infrastructure is not the bottleneck, but the current solutions being provided to customers. By Apple not embracing this radical change, the entire spectrum of computing is being codified by multiple devices, with multiple techniques, trying to achieve computing synchronicity.

The only people making the cloud “cloudy” are those who do not truly understand the current growth potential of existing technology mediums.

paulmer
January 19, 2013 at 7:57 am

Blasphemy! He shall rise again bringing unto those whom believe … the sTeVe

Sandy
January 20, 2013 at 4:13 am

Apple has lots of growth potential without having to scratch their head and wonder. TV is an absolute must to conquer. Not to worry about continually falling hardware prices because its mor about the content than the TV; but again it goes much farther than that. The roadmap for Apple is as follows;

TV: both hardware and content because if a human being is not at his computer, iPad or smart phone, then they are watching TV. They have left this too long and Google is what to worry about. Sending each household content with targeted advertising based upon browsing history is where Google is heading and Apple should have been there first. After all, I called them 8 years ago and explained this to them way before Google got into the space.

A Watch: if anyone has been looking at the web site KickStarter.com one will be aware of the ‘Pebble’ watch. Right now, nobody carries a watch, including me, so this would appear as folly, but its exactly the opposite. In the future, my kids will be connected by a device to the Internet 24/7 and have access to information of any type at their fingertips. It won’t come from an iPad mini or even a cell phone. It will be a less obtrusive device not as klunky as the iPhone. The ‘watch’ will provide an ideal mode of carrying a computer, even with a small screen. With a ‘Siri-like’ interface and monitors, TVs, printers everywhere, the voice-responding watch will display whatever is asked on most any device, either while at home, the office, or walking down the street. It will be way more than a watch. It will be a super computer and your link to your digital world.

Car computers: Even with mobile devices everywhere, the automobile market is massive and already, there are big names in the onboard computer market. As cars give way to public transport, actual numbers of computers in cars will be diminished, but there are so many cars that need to be managed with the next gen automobile on the way.

Home Automation Systems: this is the big prize of the future and all the electronic appliances that we use… Anybody seen a decent toaster in the last 20 years? Can you say coffee maker, thermostat, smart digital heating vents and even smart fridges. Hey, remember…Apple is in the ‘consumer products’ department.

The market for consumer devices is immense and apple could rule the modern world if they could just comprehend how important these areas are for the future in which to dominate.

The suggestion that each market segment should be done only if the market is massive, doesn’t hold 100% validity. Markets need to be broached for strategic reasons as well.

Anyway, I’m not sure that ‘vision’ is still nested securely within Apple. I certainly hope I’m wrong and that it is.

wiredog
January 21, 2013 at 7:23 am

Right now, nobody carries a watch, including me
Wait until you get a bit older. Nice thing about an analog watch (i.e., one with hands): You can read it without your glasses, and in low light.

Christian Volk
January 23, 2013 at 8:15 am

I think this comment is spot on. If Apple is not just a consumer electronics company but a consumer *products* company, then maybe Apple becomes the 21st century version of General Electric, starting with the television. In the ’60s, GE made nearly everything you put into a home that plugged in to the wall. Their slogan (recently replaced with something much duller) was “We Bring Good Things to Life”. Think about that in terms of the long-expected networked world and how Apple could make that ubiquitous. How? By reinventing so many products we use so that they appear magical again, just as they did the first time around 50 years ago when GE did it.

Ronc
January 23, 2013 at 4:15 pm

GE, as a consumer products company, is/was more like a maker of commodity PCs, in that their goal was to sell a lot of stuff to everyone by reducing the price as low as possible. That doesn’t seem to be Apple’s goal, so far.

Charles
January 20, 2013 at 9:20 am

I disagree with your premise, that there are few remaining product categories that can be disrupted with products that redefine the category. In fact, quite the opposite.

Okay, think of a product category. How you define that category is probably a reflection of current market demand. But when you create a new product category, there IS no existing demand. Any product category you define, is going to create demand where none ever existed. There are an unlimited number of these categories.

Let me give you an example. Apple has several patents on sensors for interactive shoes, from their collaboration with Nike. Is there any existing market for shoes that can dynamically reconfigure themselves according to sensor input? No, it’s probably not even technologically feasible.. yet. But they went ahead and defined a new product category anyway.

Maynard Handley
January 20, 2013 at 10:34 am

“Let’s take this iMac issue a little further, because I think it is a great example of where Apple’s biggest challenge lies. If the 20-inch iMac isn’t notably superior to competing Windows all-in-ones, why is that?”

Looking at individual Apple products in isolation is an ever more fruitless exercise, akin to reviewing the DRAM of a laptop while ignoring the screen or the CPU.
Apple realizes (and realized before other companies) what you pointed out in your “Windows 8 and the Military” column — CPUs are cheap, and everyone has, or soon will have, lots of them. In such a world, the value is not just in individual components, it’s in how these tie together. Twenty years on, SUN’s “The Network is the Computer” is becoming true.

As an example of that, consider the browsing experience. I can today view a number of web pages on my iMac, leave a bunch of these pages open in tabs, and then at night in bed pull out my iPad and view those pages. This may sound minor, but it is actually very nice; and it gives me the experience that I have a single browser that somehow appears on whatever screen I choose to put in my hands.
It’s also, once you actually switch to this mindset and start to use iCloud in this way, remarkably limited. To give some obvious limitations
– I can’t close the “remote” windows on my iMac, after I have finished reading them on my iPad.
– the window appears on my iPad at the top, not at where I left off scrolling on the iMac. (One could even demand the same “get the details right” when viewing multimedia like video.)
– ALL I get to see from the browser instance on another screen is currently open tabs not, eg, history, and (most notoriously) not credentials like passwords/cookies and “being logged in” state.

My point is — THIS sort of thing is the new battlefield.

Google have a vision of how this should work (and presumably they make money off all the moving parts via advertising — and perhaps, at some point, subscriptions?) Their vision is, as much as possible, everything on Google servers served up to the screen you are currently using, along with ads.

Apple have a vision of how this should work (and make money off selling hardware that is as guaranteed as anything is to all work well together and with the various software powering this). Their vision is as much as possible done as locally as possible. (Faster, lower latency, can work better without a network connection available. This is the obvious extension of the “iPod ecosystem” concept. But iCloud and other servers [Siri, Maps] are there to provide the glue that is necessary to tie these devices together.)

Microsoft? WTF knows? They appear to have three visions, can’t decide between any of them, and every vision is five years behind the times.

Samsung. Again WTF knows? What I see in Samsung (maybe I’m wrong) is that THEY look at Apple and believe what Apple is selling is HW, and so they can do just as well but selling more or less equivalent HW. I don’t see that they have much interest in or respect for SW, and they have even less understanding of the unified device model I am pushing. My guess is that if they abandon Android, their OS replacement will suck (at the UI level) and will start to lag further and further behind the leading edge US companies in terms of how well devices talk to each other. Samsung, after all, like Sony 20 years ago, can’t seem to figure out unified UI and image across its various product lines — how will it be able to unify at a deeper level?

So the interesting thing to watch is not what new hardware Apple ships (especially in the PC sector, but even phone/tablet is slowing down). What’s of interest is how well they do in terms of improving iCloud on all its various dimensions: reliability, performance, weaving it into apps to give new capabilities as I have described above, providing new UI metaphors as the capabilities become richer.

(And in this respect, I’d love to see a story about Apple’s cloud capabilities that was not crap and not fluff. The Apple cloud stories we have seen so far are of the
– I (one individual) had this bad experience with iCloud, therefore Apple will never be able to get it right OR
– I had lunch with this charismatic Apple exec involved with iCloud, therefore whatever Apple is doing in this space is awesome OR
– here are some satellite and aerial photos of Apple’s latest data center; let’s all masturbate and imagine what’s inside those buildings.
All three of these are garbage. What one wants to see is a story talking about the actual engineering talent and some indication of how they work, how they think, what their successes and failures have been, what tools they use, that sort of thing.)

Francis
January 21, 2013 at 8:03 am

Bob, there are an infinite number of new product categories. Technology is in it’s infancy. The networked world is in it infancy. Even the USA is in it’s infancy. All it takes is . . . a Steve Jobs ?

kabeer
January 22, 2013 at 3:34 am

you nailed it!

Ben Smith
January 22, 2013 at 5:38 am

Bob, have you considered driverless cars as a potential “next big thing” for Apple?

Google are already hard at work perfecting the technology, but Apple could be the ideal company to combine their design aesthetic with the usable software they are famed for to perfect the automated car. I think the auto industry fits your requirement as being large enough for Apple to disrupt. Just imagine how profitable it could be; everyone replaces their car with an entirely new driverless model. They certainly have enough money in the bank to buy up an existing car manufacturer, a prestige marque, to get the auto industry expertise. The US government would also be keen to help their ailing car industry.

I’d see a timeline of at least 5, if not 10 years before this is a reality.

Ben Smith
January 22, 2013 at 5:42 am

… combine driverless cars with electric engines, with a network of charging stations, and you’d also mightily annoy some of the world’s largest other companies; namely big oil. Perfect.

Ronc
January 22, 2013 at 4:44 pm

And give the electric company even more control over our lives. Isn’t it odd that Edison never tried to replace gasoline with electricity? Could it possibly be inherently more expensive to burn stuff to move a turbine, generate electricity, deliver it miles away to charging stations, store it in batteries, use a motor to convert it back into motion instead of burning stuff to turn a car motor directly?

Ben Smith
January 22, 2013 at 11:50 pm

There are plenty more efficient ways of generating electricity, including nuclear and renewables. An example is solar powered roadside charging stations, as Tesla are doing.

Ronc
January 23, 2013 at 4:07 pm

Nuclear is the only practical one to produce enough energy in any part of the country to power all the vehicles. But that isn’t so politically correct these days. Nevertheless IF we are going to burn stuff, as we do now to generate electricity, electric fuel for cars is inherently more costly.

shakir razak
January 22, 2013 at 7:56 pm

Hi,

New product category?

How about letting anyone upload/sell their “content” in any form through iTunes……….

How about, when you have competition among mobile Lte carriers, cable, ftth, dsl, etc, and essentially, legacy/commodity hardware, why couldn’t an Apple Tv be offered on the same model as the iphone was with the upside-down changes in that industry – also, see Tivo in the UK……

Yours kindly,

Shakir Razak

Milan Kovac
January 23, 2013 at 1:59 am

hm: “…but a lot of people would argue that they are (PC) better for the money.”

what is better on PC with same price? …Faster CPU? but:

“They have massive processing power, but unless you are editing video who would know?”

—

PC always was better at “more CPU, more RAM…” game but when it come to usability of machine… biggest problem of PC is OS and strongest selling point of Mac is OS.

“but unless you are editing video who would know?” – where you will edit you movie on Windows PC? in Microsoft Movie Maker? is there iMovie counterpart for Windows?

casual reader
January 26, 2013 at 12:22 pm

Is it just me or does the photo of Steve Jobs for “The Lost Interview” look like the Mona Lisa with a short haircut and glasses. Sorry, I know this is off topic but just had to comment.

calvin
January 29, 2013 at 2:03 pm

You leave out that what rescued Apple besides Steve Jobs, was NextStep – Mac OS X. OS X staved off the flight to Linux of the heavy developers by giving them Unix.

I had a thought the other day: what if Apple’s next iphone ran IOS, and OS X. now wouldn’t that be cool? my iphone 5 is as powerful as my old Powermac 350 running in my closet. it ran OSX okay. My dual 450 ran OSX great. Wouldn’t it be great if the iphone could do everything OSX could? (or if the apple TV could run OSX out of the box? I would have bought a dozen Apple TVs by now to play around with).

Hardware is important, but what’s more important is software. Apple wins by building great software. Steve knew that. His great innovations have all been about software, because he understood that the experience is always in software. The hardware matters, it matters a lot. But he didn’t mistake that the hardware is how you experience the software.

I tend to think Apple is dying too because they forget that software matters most of all, and software is the most powerful in a general purpose computer.

Bazz
January 29, 2013 at 4:53 pm

Many years ago I had a friend who started a signwriting business and believed he could become a monopoly in the city he worked in. Although I didn’t scoff at his claim I knew it was impossible. Why? In a free, open, just consumer society there will always be others that have better business plans, cheaper unit costs, relatives to support them etc etc etc. It the very core of a capitalist system. Ford was on top till GM took over. Toyota is now on top and in the future will be toppled by another.

Apple’s problem is simple. It shows the way to the future and others more ruthless win.

Microsoft’s Word* at some stage was very buggy on the Mac – why? To migrate Mac users to Windows where Microsoft got more money and share. Google blamed a low level technician for circumventing the “no access” to personal data of iPhone users while using that data to generate income. Both are difficult to prove. And GM in the 50s had a similar case go to court only to have the them CEO take the rap and have GM remain pure.

Steve Jobs only wanted other to invent their own stuff but the current fad soon takes over all design – fins, double headlights, touch screens. Only Polaroid had a water tight patent portfolio – and only because it had a decade or two start.

Japan’s Patent Office has a two year wait to get a patent – the time is for Japanese corporations to copy and improve the patent and thus make the first invalid in Japan.

So success for honest folk is difficult.

The other problem of Apple is a replay of Henry Ford’s belief that the Tin Lizzie is all one needs.
Most people buy on stupid principles like color shape etc. And some even think Apple is rubbish!

The only winners are the behind the scene players Google, Intel, Microsoft who most people don’t even know are profiting when they buy a HP Galaxy or Dell. Its a lesson Apple has not learned.

* Word became the defacto word processor on the Mac because of a deal between Apple and Microsoft – so much for competition.

Ronc
January 30, 2013 at 4:54 pm

Not sure what you mean by HP Galaxy or Dell. I think “HP Galaxy” is some sort of “OpenVMS” software and Dell makes Computers that run Windows or Linux. I would guess people that buy that sort of stuff understand there are licensing agreements that may involve other companies, but that’s not usually their concern. They care about what it costs them and how it benefits them. (Who profits may come under the heading “white people problems”. 🙂 )

Once I initially commented I clicked the -Notify me when new feedback are added- checkbox and now every time a remark is added I get 4 emails with the identical comment. Is there any method you’ll be able to take away me from that service? Thanks!